Service Tax paid on outward transportation and entitlement of Cenvat Credit

Since 10^th September 2004, the date on which Cenvat Credit Rules, 2004 came into force, much water has flown and there is still confusions and doubts about entitlement of Cenvat Credit and various related issues.

One such doubtful issue is, whether Cenvat Credit of Service Tax paid on Goods Transport Agency Services is eligible? If yes, whether there is any limitation i.e. is it restricted to the term 'up to the place of removal'

The meaning of Input services has been defined under Rule 2(l) of the Cenvat Credit Rules, 2004

I am of the opinion from very beginning that in case of Manufacturer there is no restriction. A manufacturer can rightly avail the Cenvat Credit of Service Tax paid on GTA either from the place of factory to the place of removal or from the place of removal to the place of customer or from the factory to the place of customer.

However, department has issued various show cause notices for disallowance of such credit, if taken by the manufacturer.

Now, in matter of NHK SPRING INDIA LTD.  reported in 2006 -TMI - 752 - COMMISSIONER OF C.E. (APPEALS) [Central Excise Section], Commissioner (Appeals) has taken a stand which confirms my opinion as above and allowed the Cenvat Credit.

The commissioner (Appeals) in has order stated that,

'I am of the opinion that the Service Tax paid on transportation of finished goods from the factory to the premises of the customer can be taken as Cenvat Credit by the Appellants and therefore, the denial of the same vide the impugned order is not proper.'

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You may also refer our e-book on Cenvat Credit and relevant chapter as: -

Cenvat Credit Practice Manual

Chapter 02-Input Services Common

Chapter 02-A - Input Services Manufacturer

Chapter 02-B - Input services - Service Provider